AICPA proposes, adopts ethics guidance.

The Institute's Professional Ethics Executive Committee (PEEC) issued an exposure draft (ED) (www.aicpa.org/download/ethics/2005_0915_ed_int101-1.pdf) proposing an independence standards revision that would require members to use the risk-based approach described in A Conceptual Framework for AICPA Independence Standards (www.aicpa.org/download/ethics/AICPA_Draft_Conceptual_ Framework_FINAL.pdf) when considering whether a member-client relationship not specifically addressed by the Code of Professional Conduct "would lead a reasonable person aware of all the relevant facts to conclude that there is an unacceptable threat to the member's and the firm's independence." In addition, if the threat to independence is not at an acceptable level--as described in the framework--the proposal requires members to document the threat and the safeguards applied.

Another exposure draft from the PEEC proposes two new interpretations (www.aicpa.org/download/ethics/2005_0915_ed_indemn.pdf) under Rule 101, Independence (www.aicpa.org/about/code/et_100.html). The first proposal provides guidance on the impact that certain indemnification and limitation of liability provisions may have on a member's independence when they are included in engagement letters or other client agreements. The second proposal provides guidance on the impact on a member's independence associated with rendering litigation and forensic accounting services to attest clients. Comments on both EDs are due December 16, 2005.

The PEEC also adopted a new ethics interpretation, 101-15, "Financial Relationships" (www.aicpa.org/download/ethics/interp101_1.pdf), that defines the terms financial interest, direct financial interest and indirect financial interest as used in Ethics Interpretation 101 under Rule 101 (AICPA, Professional Standards, volume 2, ET section 101.01) and provides guidance on determining whether financial interests should be considered direct or indirect.